4 Amazon Apple Facebook And Google

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REV: DECEMBER 12, 2013
JOHN DEIGHTON
LEORA KORNFELD
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Amazon, Apple, Facebook, and Google
The Internet was not designed as a marketing platform. On the contrary, until about 1995
commercial firms were banned from using its main data routes.1 It began as a defense project in the
1950s to create a nuclear bomber early warning system and then evolved into the Department of
Defense’s Advanced Research Projects Agency Network (ARPANET). Eventually the Internet
expanded to become a global system, but with membership restricted to universities and scientific
research laboratories.
tC
Congress effectively privatized the Internet in 1995. The result was an explosion of innovation,
much of it focused on four core marketing tasks: lead generation, transactions, information sharing,
and persuasion. Premature optimism about the Internet’s potential to revolutionize marketing
practices led to the so-called dot-com bubble from 1997 to 2000, but by 2013, the Internet was integral
to the way marketing was practiced.
Four companies in particular, capitalized at close to $1 trillion (Exhibit 1), ruled four sectors of
Internet marketing. Online advertising was dominated by Google, online retailing by Amazon, and
social engagement by Facebook, while Apple set the standard for the interface devices that were
being called “the remote controls for many people’s digital lives.”2
No
But there was no orderly division of the spoils of market-making among the four. Each hoped to
be the one to claim digital marketing’s soul, fighting skirmishes on sector boundaries as well as in
new sectors (Exhibit 2). Google and Facebook competed for dominance of online advertising. Apple’s
iTunes and Google Play challenged Amazon over the retailing of digital content. Apple and Google
fought to own the smartphone market. Apple, Google, and Amazon contested digital television.
Google seemed to have a head start in payment systems and, potentially, banking, but Apple was
likely close behind.
Do
Throughout the field of online marketing, from distribution to communication to digital product
formats to, ultimately, pricing, these four companies battled to set standards. Any one of them could
aspire to establish the dominant design for all of online marketing.
________________________________________________________________________________________________________________
Professor John Deighton and Research Associate Leora Kornfeld prepared this case. This case was developed from published sources. HBS cases
are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of
effective or ineffective management.
Copyright © 2013 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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The Modern Era Begins: Amazon Becomes Profitable
While the start of the commercial use of the Internet might be dated to the launch of the Netscape
browser or AOL or Yahoo! portals in the early 1990s, the contemporary landscape began to take
shape when Amazon, which had begun operations in 1995 as an online bookstore, turned in a $5
million profit in December 2001, reversing six years of losses. As 2013 began, its global annual
revenues were about $57 billion. Books together with digital media generated 37% of net revenues.
General merchandise accounted for 59%, and fees for Amazon Web Services and credit card
payments contributed about 4%.3
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Although Amazon Web Services was making a modest contribution to reported revenues, it
represented a radical departure from conventional online-retailing practice. Amazon launched it in
2002 to place a suite of cloud-computing services at the disposal of manufacturers seeking to reach
Amazon’s online marketplace, but soon expanded to offer cloud-computing services to many firms
that were not part of its retail supply chain—hosting, for example, information-technology services
for Dropbox, Reddit, and the New York Times. It framed the offering as elastic information-technology
infrastructure services, supplied flexibly as the businesses demanded them, and asking for payment
only for what was used. For example, a pharmaceutical company could rent computing capacity to
execute large-scale simulations, a media company could stream videos or music to customers, and an
enterprise could stream training videos to its workforce. These outsourcing offerings, while not core
to Amazon’s business, gave it scale in the information technology that was core.
tC
Web Services was not simply a way to achieve scale in technology. It expanded the assortment
offered on its website and gave Amazon visibility into the sales of retailers who shared its platform.
In the digital-camera category, for example, Amazon’s assortment of stock-keeping units (SKUs)
compared to on- and offline competitors was as follows:4
Walmart Stores
Target.com
Walmart.com
Amazon
30
210
408
8,010 (of which 450 were directly retailed by Amazon)
No
All 8,010 SKUs were available to be returned in response to a shopper’s query on Amazon, and if
the shopper showed interest in one but did not buy, the shopper could, at Amazon’s discretion, be
made the subject of a retargeting advertising campaign.
By 2013, Amazon was the giant of the e-retailing world. Its $31 billion of U.S. retail revenue
comprised close to a fifth of the sum of revenues of the next 100 U.S. online retailers. But e-retailing
had not yet penetrated U.S. retailing deeply. If automotive sales were included, U.S. on- and offline
retailing summed to $5 trillion.5
Do
Marketing and advertising on behalf of its suppliers had long been elements of Amazon’s
business model: a collaborative filtering tool, for example, would tell customers, “customers who
bought X also bought Y.” But in 2011 Amazon launched an advertising network that, in 2012,
AdWeek described as “advertising’s sleeping giant.”6 A visitor browsing on Amazon and showing
interest in a particular product, but failing to buy, would be tagged with a tracking cookie on their
browser. Later, when they were elsewhere on a network of websites, they might be shown
advertising for the overlooked product and an opportunity to buy it.
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Amazon, Apple, Facebook, and Google
In addition, Amazon was rumored to be entering the smartphone market in 2014 with a product
that would support the practice known as “showrooming,” in which consumers visited physical
stores to compare and try out products and then bought them online.
Then Came Google
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Before 1998, most web users began their Internet visits at portals such as Yahoo!, AOL, or
Microsoft’s MSN. They browsed content sites linked to from the portal home page or used its
proprietary search tool to move on to other web content sites. The portals earned revenue by showing
display ads to the traffic, so they rated content by its ability to detain traffic, referred to as its
“stickiness.” Search, at that time, was just one of the services used to attract traffic to the portal and
because it was not sticky, it was not considered important.
Google was an anomaly. When it launched in 1998, its website offered nothing but search and
therefore earned no revenue. But the Google site was merely a demonstration project to show the
power of its search algorithm, which it hoped to license to portals. In June 2000, the strategy met with
success when Yahoo! chose Google as its search engine. The win boosted Google’s stream of queries,
supplying new data to train the search algorithm. It also provoked Google to find a way to profit
directly from the increase in search traffic, not just indirectly through licensing fees.
In November 2000, therefore, Google began to sell text advertising to advertisers who wanted to
reach consumers who were searching for particular keywords. Advertising appeared on the right
side of the search-results page in text boxes. Google branded the service AdWords and priced it as a
function of the number of people who clicked the text box. Armed with a service that made money
from traffic, it set out to find more traffic.
No
tC
In June 2003, Google introduced AdSense, which allowed it to serve advertising not just on the
search-results pages of Google and its portal partners, but on any contextually relevant website
across the entire Internet. Suddenly Google had an incentive to grow not only its share of web
searching, but also the amount of content on the Web itself. It launched a free webmail service,
Gmail, that became a medium on which to place ads matching the content of particular e-mail
messages. In December 2004 it set out to scan and index all the world’s books. Dozens of content
sites, such as Froogle, Blogger, Picasa, a calendar service, and a translator, began to flow from a
combination of Google’s product development and acquisitions teams.
Google made a very big content acquisition in October 2006, when it bought YouTube, a video
storage and distribution site, for $1.65 billion. YouTube did not charge either uploaders or viewers of
video, but earned revenue from advertising. The site later introduced premium content channels, a
move that began to position YouTube as a competitor to cable television.
In April 2007, Google made an even more costly acquisition, this time to improve ad-serving
efficiency rather than scope, when it bought DoubleClick, the dominant online ad-serving platform,
for $3.1 billion. In a similar vein it later bought AdMob, the dominant server of ads to mobile devices.
Do
Soon Google began implementing changes on its search-results pages that allowed it for the first
time to earn revenue not just from advertising on the right side of its results pages but also from the
results lists on the left side. After buying ITA, whose software searched for airline seats, Google
began in 2011 to serve up a matrix of flight and fare information to flyers, and it received an affiliate
fee from travel websites when people clicked to book flights. In addition, results not generated by the
search algorithm (sometimes termed “hard-coded results”) began to appear at the top of lists for
other kinds of searches: finance, health, movies, maps, and news.
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Then Google set a course that, at first glance, seemed tangential to the ad-based course it had
followed until that point. It launched the Android mobile-phone operating system in November 2007,
which, because the software was free, had no obvious revenue model. Then, in August 2011, Google
made its largest-ever acquisition, paying $12.5 billion for Motorola Mobility, a manufacturer of
mobile handsets. This purchase allowed Google to build phones as proof of concept for the Android
operating system.
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In November 2011, the company launched Google Play, an online music-storage and purchasing
service with functionality similar to elements of iTunes. At about the same time it launched Google
Wallet, which allowed the smartphone to be used as a payment system. It began working with
retailers to offer a service competitive with Amazon to find customers through search and was
expected to be launching same-day delivery soon. In the same year, it launched Google+, a social
network integrated with its search, photo, and video offerings. A year later, it had only 20% of the
unique monthly users that Facebook had and was holding its users for 3 minutes a month compared
to Facebook’s 400 minutes. Many of those users had joined only because Google was requiring a
Google+ account as a condition for creating an account with Gmail, YouTube, or Zagat. A Google+
account profile included name and address, interests and preferences, and in many cases a list of
friends, so it supplied profiling data for advertisers.
tC
By the end of 2012, despite more than a decade of fast-paced innovation beyond search, Google
still made most of its profits from search. Advertising made up about 97% of Google’s $43 billion
gross revenues, 69% from ads on Google’s own websites (mainly search ads on its search site and
display ads on YouTube and its 260 million Gmail accounts), and 28% from ads on third-party
publisher sites (mainly display ads). The revenue from ads on Google sites accrued entirely to
Google, while about 60% of the revenue from ads on third-party sites was paid to the third parties, so
Google’s operating income relied disproportionately on ads served on its search engine. About half of
Google’s revenue was earned from U.S. advertisers.7
Apple Enters the Internet Economy
No
Apple Inc. was founded in 1976. By 2004 its market capitalization was $8 billion, but from January
2009 to the start of 2013 it grew from $75 billion to $600 billion to become the most valuable U.S.
public company of all time.8 It had evolved from a manufacturer of hardware for the pre-Internet age
to an enterprise that investors appraised as a leader in the Internet economy.
Do
The precise trigger for this sharp reappraisal was often debated. No single change in management,
shift in revenues, or new product offering fully explained the 2009 takeoff. Co-founder Steve Jobs had
returned to lead the company in 1997 after a period in exile. The iTunes software and the
complementary iPod music player were launched in 2001 but did not materially lift revenues. The
iPhone was launched in 2007 and the iPad in 2010. While revenues by 2012 depended heavily on
retail sales of the latter two devices, optimism regarding the company’s prospects in the digital
economy seemed to rest more on the seamlessness and elegance of the devices’ integration with the
Internet than its success solely as a device manufacturer.
While Google’s Android was the dominant operating system on mobile devices internationally,
installed on 72% of phones sold in the third quarter of 2012,9 Apple led Google in mobile e-commerce
access. In 2012, iOS, Apple’s mobile operating system, was the system that most people in the U.S.
used to access the mobile Web, while Android devices had less than 20% of this market. Major ecommerce retailers such as Amazon and Target received almost 10% of their traffic from mobile
devices, and iOS sent substantially more traffic than did the Android system.10
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Amazon, Apple, Facebook, and Google
Another battle for control of access to e-commerce was playing out between Amazon’s Kindle
platform, which distributed digital content for customers to view, and Apple’s combination of iTunes
and iPad. While the Kindle was optimized for books, the iPad hoped to be a good-enough solution to
a broader range of digital content. In the battle with Google for search, Siri, Apple’s voice-activated
search tool, posed a challenge.
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In addition, smartphone applications, or apps, played an important role in online marketing.
Mobile devices could host customized apps and/or combine content stored on the user’s device with
Internet resources to manage interactions with a wide variety of commercial services such as banking,
travel, shopping, local information, news, video, sports, blogs, games, social media, maps, and music.
Here, too, Apple led Google. Of all the apps downloaded since Apple and Google began distributing
them in the second half of 2008, Apple was the source of 60%.11
Facebook Transforms the Internet Experience
Facebook had been available to the general public since 2005, but it did not begin to grow until
about 2009 (see Exhibit 3). In just two years, its share of the time Americans spent online grew with
the intensity of an epidemic, from 2% to 20%, with increases in both the number of users and the
hours they spent on the site.
tC
In the U.S., by 2013, 153 million people were visiting Facebook at least once per month, accounting
for nearly three quarters of all those who went online. The average Facebook visitor spent 6 hours
and 41 minutes on the site per month. More people visited Google, but they spent far less time—only
1 hour and 54 minutes (Exhibit 4). The Internet as a whole occupied 28 hours per month for each of
the 212 million Americans who went online on any device (Exhibit 5), and 21 hours per month for
each who went online on a mobile app (Exhibit 6.) Television, by comparison, occupied 168 hours
per month for the 292 million people who watched it (158 hours in real time and 9.5 hours timeshifted).
No
When time spent on Facebook was combined with time on other social networks and blogs, the
social-networking category accounted for a quarter of all time spent online, double that of online
games and more than double the time spent on e-mail. In one month, 97% of users accessed social
media from a computer, and 37% accessed it from a mobile phone. The social-media population was
broadly representative of the online population generally.
Despite dominating time online, Facebook was slower to attract online advertisers than Google
had been. It performed well in the $15 billion U.S. display-advertising sector (Exhibit 7), where it was
expected to generate $2.2 billion in 2012, compared to Google’s $2.3 billion. In 2012 it delivered onefifth of all display-advertising impressions. But it had no significant presence in the $16 billion U.S.
paid-search market, where Google earned $12 billion. Yet Facebook’s founder liked to claim that the
social network was handling approximately a billion queries a day, adding, “and we’re basically not
even trying.”12
Do
In local retailing, Facebook offered a service on its mobile app that enabled users to discover local
offline businesses through the experience of their friends. In addition, Facebook’s Gifts service was
viewed by some as a beachhead into e-commerce. The back-end infrastructure to support gift
transactions could as easily support buying for Facebook members themselves.
Most of Facebook’s revenue, however, came from advertising. Facebook users could declare
themselves to be fans of brands and celebrities by clicking the “like” button on the brand or
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celebrity’s Facebook page. Advertisers could buy the right to advertise on the pages of friends of a
fan with a tag showing the name of the fan. The typical Facebook user had 229 friends, and friends
reached by tagged ads tended to click through to the advertiser’s site at two to three times the rate of
friends exposed to untagged ads.13 In addition to such paid media exposures, advertisers could
receive so-called shared media exposures if they could induce a Facebook user to pass on a brand
impression to friends.
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Late in 2012, Facebook launched its Facebook Exchange, an ad-bidding and retargeting network.
Members of the Facebook Exchange network of websites could place tracking cookies on the
browsers of their site visitors, and, for those visitors who were Facebook members, Facebook would
contract to serve advertising to them when they logged in to Facebook. Because Facebook users
tended to visit the social network frequently, the interval between, for example, showing interest in a
product on Drugstore.com and visiting Facebook tended to be short, and early indications were that
ads presented on Facebook tended to perform better than other retargeted ads. Facebook could,
potentially, apply the system in reverse: members could be “cookied” when their postings on
Facebook contained commercially actionable insights, and display advertising could be delivered
when those cookies appeared elsewhere on the Web. Fifty percent of Facebook visits were made
using mobile devices, which were inhospitable to advertising, so reverse retargeting would allow
Facebook to profit from advertising on other sites’ larger displays.
The Media Advertising Market
U.S. marketers spent about $174 billion annually on offline broadcast (television, radio, and print)
advertising.14 They spent an additional $169 billion on direct marketing and advertising, including email.15 Online, by contrast, marketers spent about $37 billion.16
tC
Many observers noted that online spending seemed to lag behind audience attention. Americans
spent about 26% of their media time online, yet advertisers spent 20% of their media budgets online.
The disparity between time spent accessing the Internet from a mobile device and advertising on a
mobile device was even greater: 10% of media time contrasted with 1% of advertising.17 It was
common in the online-advertising industry to cite Kevin Kelly, founding editor of Wired Magazine,
who argued that “money follows attention,”18 and to conclude that online media markets were
poised to grow strongly.
No
Online advertising spending in 2012 was distributed as follows:
Do
Search advertising on desktops and laptops
Paid search
$16.0 billion
Search advertising on mobile devices
Paid search
$2.0 billion
Display advertising on desktops and laptops
Banners
Digital video and rich media
Sponsorships and lead generation
$8.0 billion
$3.4 billion
$2.7 billion
Display advertising on mobile devices
Advertising in applications (apps)
$1.3 billion
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Advertising on mobile websites
$0.5 billion
Classified (e.g., auto and real estate listings, job
boards, auction listings, yellow pages)
$2.7 billion
E-mail (banners and links that appear in e-mail
newsletters and other commercial e-mail)
$0.4 billion
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Source: Compiled from emarketer.com/newsroom/index.php/unexpected-growth-faceb…-google-lead-significant-uptickmobile-advertising-us-market-share, accessed December 18, 2012; adage.com/article/digital/facebook-predicted 339
m-mobile-ad-revenue-year/238810/, accessed December 18, 2012; eMarketer press release, “Google to become US
Display Ad Leader,” September 20, 2012, http://www.emarketer.com/newsroom/index.php/google-display-adleader/, accessed December 11, 2012; eMarketer, “Google’s Share of Search Ad Revenues Rises, Unaffected by Bing,”
press release, June 8, 2011, http://www.emarketer.com/PressRelease.aspx?R=1008451, accessed November 28, 2011;
IAB Internet Advertising Revenue Report, 2012, first six months’ results, October 2012; and casewriter interpretation.
The Search-Engine Advertising Market
Globally, more people used a search engine than any other category of software. Eighty-five
percent of the world’s Internet users (and 94% of U.S. users) used a search engine in 2011, compared
to 64% who used e-mail (82% in the U.S.). The number of so-called core desktop searches in the U.S.
(which excluded specialized searches on local directories and maps) had grown from 7 billion to
nearly 18 billion in the five years up to 2012, although the trend had flattened by 2013.19 (See
Exhibit 9.)
tC
U.S. desktop searches were dominated by Google, which held a market share of 66% from 2009
through 2012, even as competitor shares churned. Yahoo! Search, at 12%, had lost market share, and
Microsoft’s Bing had grown to 16% (Bing had powered Yahoo! Search since 2009). Ask had 3%, and
AOL (powered by Google) had 1.5%.20 Revenue from paid search on desktop search engines directly
benefitted from five years of growth in core search volume and grew 17% year on year even in 2012.21
Google’s share of paid-search advertising revenue had been substantially larger than its share of
searches for this whole period.
No
Mobile searches grew as desktop searches slowed. After the launch of the Apple iPhone in 2007,
desktop and laptop computers were no longer the only devices by which the Internet could be
reached. By 2012, an average of 15% of searches originated on mobile devices. For restaurant
searches, the mobile share was 30%. About 50% of social media visits occurred on mobile devices.
Google controlled almost all of the mobile-search advertising market.22 Click-through rates to
advertiser sites on mobile devices was lower than for desktops and laptops, but other actions such as
offline store visits, offline sales, and phone calls to mobile advertisers performed well.
Do
Specialized vertical search, from desk and mobile devices, began to be a factor in the search
market around 2007 with the rise of Yelp, a local directory and review service; TripAdvisor in travel
and hotels; and restaurant review sites such as Zagat, OpenTable, and UrbanSpoon. These sites
combined the comprehensiveness of a directory with relevance indicators from customer reviews and
awareness of a searcher’s location. As reviewers built reputations, and the sites built community
elements, some observers speculated that search engines might be vulnerable to the trend toward
search informed by the preferences of the searcher’s social network, most apparent in the rise of
Facebook.
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Amazon, Apple, Facebook, and Google
The Display-Advertising Market
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With offline media, advertisers liked to place ads alongside so-called “premium content” that
matched the interests of their consumers. Thus financial-services brands would advertise on the
pages of the Wall Street Journal, and household products on daytime television. Many web publishers,
for example, Yahoo! and AOL, followed the offline logic. They built sites that curated high-quality
content that matched offline content categories, and other sites, such as iVillage and Slate.com, that
specialized in particular audience demographics.
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Other web publishers put their faith in the idea that advertisers would buy audiences, not
premium content. By “audiences,” they meant viewers profiled by data describing their past actions
or their profiles. Many services attached viewer profile data to cookies on the viewer browsers, so
that wherever the viewer went on the Internet, regardless of the content they chose to view, an
advertiser who valued that viewer’s profile could deliver a display advertisement.
The latter kind of publisher sold display advertising at a far lower cost per exposure than
premium-content publishers because the volume of unsold advertising space on poorly trafficked
websites was substantial, and the automated advertising exchanges and advertising networks that
represented such publishers could match ads to viewers without expensive sales forces. The largest of
these advertising exchanges, AdX (formerly Doubleclick), was owned by Google. During 2012 the
average cost per thousand exposures (CPM) of display advertising declined, suggesting that
advertisers were tending to buy audiences rather than premium sites, and were satisfied with the
results they were getting.
The Internet Retailing Market
tC
Most retailing in the United States still took place offline. Depending on which categories of retail
trade were included in the denominator, online retailing was as little as 5% of all retail or as much as
10% (if automotive, food, and furniture were excluded). However, many retail transactions involved
some search online, so that perhaps 15% of the most generous estimate of retail spending touched the
Internet at some point.
No
By far the largest player in online retailing was Amazon, with $48 billion in global online sales for
2011. The second largest online retailer was Apple Inc., with $15.8 billion in online sales for 2011
(Exhibit 10), attributable to iTunes music sales, digital software sales, and Internet-related equipment
sales, such as Mac computers, iPhones, iPods, and iPads. That same year, Staples was third on the list
of top Internet retailers at $10.6 billion, Walmart was fourth at $5 billion, and Dell, Office Depot, and
QVC.com had sales of about $4 billion each.23 eBay was not usually classified as a retailer because it
functioned as a platform for third-party sellers, but if it was so classified, then it was second behind
Amazon, with its sellers moving about $28 billion of products and services in 2011.24
Do
By category, online retailing was far more skewed toward general merchandise, and away from
specialty merchants, than offline. Four general merchandise players in particular—Amazon, eBay,
Walmart, and Sears—did 50% of the total of the top 100 retailers’ online sales. Electronics, which
included Apple and Dell, was the second-largest category at 18%, and office supplies came in third.
All three categories skewed above their share in offline retailing. Other categories, particularly
apparel, health and beauty products, and food, skewed well below their offline share.25
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Amazon, Apple, Facebook, and Google
The distribution of sales per retailer among online retailers showed a very pronounced long tail.
About 95% of the Internet Retailer top 500 retailers in 2011 were so small as to be barely viable. Quite
well-recognized specialists such as Groupon ($1.6 billion), Etsy ($526 million), and GiltGroupe ($500
million) were of more interest as online prototypes than as models of success.
Conclusion
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The Economist, in a December 2012 editorial, wrote that “The four giants of the Internet age—
Google, Apple, Facebook, and Amazon—are extraordinary creatures. Never before has the world
seen firms grow so fast or spread their tentacles so widely. . . . The digital revolution these giants
have helped foment has brought huge benefits to consumers and businesses, and promoted free
speech and the spread of democracy along the way. Yet they provoke fear as well as wonder. Their
size and speed can, if left unchecked, be used to choke off competition. . . . The giants want to get
consumers hooked on their own “platforms”—combinations of online services and apps that run on
smartphones and tablet computers.”26
Do
No
tC
The marketing corporations that fed the advertising and e-commerce revenues over which the
four giants of the Internet competed had a vital interest in the outcome. Just as the automobile,
shopping centers, and television networks had shaped consumer behavior in the 20th century, as well
as shaping the capabilities of marketing experts and the forms of the most successful marketing
corporations, so the new platforms of marketing would play a part in shaping the winners and losers
of the 21st-century economy. Search-engine marketing had revolutionized publishing, wounding
newspapers and catalogs, but the desk-bound age was transitioning at breathtaking speed to one that
relied on mobile devices. Would search survive? Browsers and portals had initially been the gateway
to the Web, but by 2013 many sessions began with a visit to a social network. How aggressively
should marketing firms court the favors of social-commerce platforms? E-commerce merchants were
paying a toll to firms like Google and Yahoo! to drive traffic to their online stores. Would the selfsufficient marketing systems of online merchants like Amazon let other merchants bypass the tolls?
Television, banking, and telecommunications, too, saw their consumers experimenting with new
practices. The future of markets and marketing was never more fluid.
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Exhibit 1
Amazon, Apple, Facebook, and Google
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Apple, Amazon, Facebook, and Google Essential Statistics
Company
Year
Founded
Market
Capitalization
$bn
Gross
Margin
Amazon
Apple
Facebook
Google
1994
1976
2004
1998
$110.7
$548.2
$56.9
$222.8
25.3%
40.2%
74.5%
53.7%
Revenue
$bn**
$57.3
$156.5
$4.6
$47.5
Profit $bn**
Cash
$bn*
Employment*
loss
$41.7
loss
$10.6
$5.2
$121.3
$10.5
$46.8
81,400
76,100
4,331
53,546
* As of September 30, 2012.
** 12 months to September 30, 2012.
Amazon, Apple, Facebook, and Google Commerce and Advertising Features as of 2013
Amazon
Apple
Facebook
Google
Limited
Via Siri
Rumored
Dominant
Reviews
None
Dominant
Google+
Dominant
Via iTunes
Gifts
Places
Streaming on
Web
Apple TV
None
Google TV
Smartphone capability
Rumored
iOS
Rumored
Android
No
Exhibit 2
op
yo
Source: Compiled from Bloomberg, company 10-K and 10-Q Reports, The Economist.
Credit card
Rumored
None
Google Wallet
Ad Exchange
iAd
Facebook
Exchange
Dominant
Search capability
tC
Social capability
Retail capability
Television capability
Payment-system capability
Advertising network
Do
Source: Compiled from Wall Street Journal, December 26, 2012, and casewriter analysis.
10
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Exhibit 3
513-060
rP
os
t
Amazon, Apple, Facebook, and Google
Share of Hours Spent Online per Week in the United States
18
Facebook
14
Google
Yahoo!
Microsoft
Q3 2011
Q2 2011
Q1 2011
Q4 2010
AOL
Q3 2010
Q2 2010
Q1 2010
Q3 2008
Q1 2008
Q4 2007
Q3 2007
0
tC
2
Q4 2009
4
Q3 2009
6
Q2 2009
8
Q1 2009
10
Q4 2008
op
yo
12
Q2 2008
Share of Hours Spent Online (%)
16
Do
No
Source: Mark Gongloff, “Facebook Sucks Up a Ridiculously Huge and Growing Share of our Time Wasted Online,” September
26, 2011, http://blogs.wsj.com/marketbeat/2011/09/26/facebook-sucks-up-a-ridiculously-huge-and-growing-shareof-our-time-wasted-online/, accessed November 28, 2011.
11
This document is authorized for educator review use only by Shoaib Ali, HE OTHER until September 2018. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
Amazon, Apple, Facebook, and Google
rP
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513-060
Exhibit 4 Top Ten U.S. Web Brands Ranked by Unique Monthly U.S. Visitors on Desktop and
Mobile Devices, September 2012
Brand
Unique Visitors (000)
1
2
3
4
5
6
7
8
9
10
Google
Facebook
Yahoo!
YouTube
MSN/Bing
Microsoft
AOL
Amazon
Wikipedia
Ask
Time per Person (hh:mm)
175,000
153,000
140,000
131,000
125,000
89,000
88,000
80,000
78,000
75,000
1:54
6:41
2:21
1:45
1:14
0:43
2:15
0:35
0:19
0:12
op
yo
Rank
Read as: During September 2012, 175 million people in the U.S. visited Google's websites on all devices, and each spent,
in total, across multiple visits, 1 hour, 54 minutes on the site.
Source: Nielsen press release, “September 2012 Top US Web Brands,” November 8, 2012, http://blog.nielsen.com/nielsen
wire/online_mobile/september-2012-top-us-web-brands/, accessed December 10, 2012.
U.S. Internet Use from all Devices for September 2012
tC
Exhibit 5
# of People Who Had Internet Access
# of People Who Went Online
278,570,000
212,172,000
No
The following averages apply to the 210 million U.S. individuals (96.8% of all people who went
online) who visited the sites of the top ten web brands from PCs and mobile devices during
September 2012.
63
95
2,563
0:01:00
28:32
Do
Sessions/Visits per Person
Domains Visited per Person
Web Page Views per Person
Duration of a Web Page Viewed
Online Time per Person
Source: Nielsen press release, “September 2012 Top US Web Brands,” November 8, 2012, http://blog.nielsen.com/
nielsenwire/online_mobile/september-2012-top-us-web-brands/, accessed December 10, 2012. The source
of the number active during the month (96.8%) was personal communication from a Nielsen analyst.
12
This document is authorized for educator review use only by Shoaib Ali, HE OTHER until September 2018. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
Exhibit 6
513-060
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Amazon, Apple, Facebook, and Google
U.S. Internet Use from PCs and Mobile Devices for July 2012
# of People Who Went Online:
on a Personal Computer
on a Mobile App
on a Mobile Website
204,721,000 (down 4% year on year)
101,802,000 (up 85% year on year)
95,176,000 (up 82% year on year)
op
yo
Duration of Visits (hours per user per month):
Personal Computer Visits
28.6 hours
Mobile App Visits
21.2 hours
Mobile Website Visits
4.9 hours
Source: Nielsen press release, “September 2012 Top US Web Brands,” November 8, 2012, http://blog.nielsen.com/
nielsenwire/online_mobile/september-2012-top-us-web-brands/, accessed December 10, 2012.
Exhibit 7
U.S. Mobile Search and Display Advertising, 2012
Advertising on mobile devices (phones and tablets) trebled between 2011 and 2012 and was
estimated at $3.8 billion for 2012. It comprised more than 10% of all online advertising.
Google
All other
tC
U.S. Mobile Search Ad Revenues on Search Engines, 2012
Total (billions)
93.3%
6.7%
$2.0
No
U.S. Mobile Display Ad Revenues at Top 4 Sites, 2012
Facebook
Google
Pandora
Twitter
18.4%
17.0%
12.2%
7.3%
Do
Total Top 5
54.9%
Total (billions) $1.8
Source: Compiled from emarketer.com/newsroom/index.php/unexpected-growth-faceb…-google-lead-significantuptick-mobile-advertising-us-market-share, accessed December 18, 2012, and adage.com/article/digital/
facebook-predicted 339 m-mobile-ad-revenue-year/238810/, accessed December 18, 2012.
13
This document is authorized for educator review use only by Shoaib Ali, HE OTHER until September 2018. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
Exhibit 8
Amazon, Apple, Facebook, and Google
rP
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513-060
Search and Display Advertising, United States 2012
We estimated the total of U.S. Internet advertising expenditures for calendar 2012 to be $31 billion.
The Interactive Advertising Bureau has two categories in its estimate of Internet advertising that we
exclude. It counts e-mail and classified and auction advertising, bringing its estimate to $34 billion.
Search expenditure comprises paid listings on desktop and mobile search engines, text links in
articles, paid inclusions, and site optimization, as defined by the Interactive Advertising Bureau.
Display expenditure comprises banners, rich media, digital video, and sponsorships on desktop and
mobile websites as defined by the Interactive Advertising Bureau.
Google
Microsoft
Yahoo!
AOL
75.9%
7.9%
7.9%
1.7%
Total Top 4
93.5%
Total (billions) $16.0
op
yo
U.S. Online Search Ad Revenues at Top 4 Search Engines, 2012
U.S. Online Display Ad Revenues at Top 5 Sites, 2012
15.4%
14.4%
9.3%
4.5%
3.6%
tC
Google
Facebook
Yahoo!
Microsoft
AOL
No
Total Top 5
47.2%
Total (billions) $15.0
Do
Source: Compiled from eMarketer press release, “Google to become US Display Ad Leader,” September 20, 2012,
http://www.emarketer.com/newsroom/index.php/google-display-ad-leader/, accessed December 11, 2012;
eMarketer, “Google’s Share of Search Ad Revenues Rises, Unaffected by Bing,” press release, June 8, 2011,
http://www.emarketer.com/PressRelease.aspx?R=1008451, accessed November 28, 2011; IAB Internet Advertising
Revenue Report, 2012, first six months’ results, October 2012; and casewriter interpretation.
14
This document is authorized for educator review use only by Shoaib Ali, HE OTHER until September 2018. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
513-060
rP
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Amazon, Apple, Facebook, and Google
Exhibit 9 Number of Desktop Web Searches per Month in the United States on Core Search
Engines (Google, Yahoo!, Microsoft, Ask, and AOL)
19
17
16
15
14
13
12
11
10
9
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
tC
Jan-07
op
yo
Number of Searches per Month (Billions)
18
Do
No
Source: Compiled from comScore, “comScore Releases October 2012 U.S. search Engine Rankings,” press release,
http://www.comscore.com/Insights/Press_Releases/2012/11/comScore_Releases_October_2012_U.S._
Search_Engine_Rankings, accessed December 10, 2012, and earlier comScore releases.
15
This document is authorized for educator review use only by Shoaib Ali, HE OTHER until September 2018. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
Amazon, Apple, Facebook, and Google
Retailing by Category in U. S.
Created by casewriter with data from Internet Retailer 2011.
Do
No
Source:
tC
op
yo
Exhibit 10
rP
os
t
513-060
16
This document is authorized for educator review use only by Shoaib Ali, HE OTHER until September 2018. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
513-060
rP
os
t
Amazon, Apple, Facebook, and Google
Endnotes
1
The NSFNET Backbone Services Acceptable Use Policy, June 1992, http://www.intercom.co.cr/
internet/research/1992/06.htm, accessed January 3, 2013.
2
“Battle of the Internet Giants,” The Economist, December 1, 2012.
3
Amazon.com Inc., Form 10-K, http://www.sec.gov/Archives/edgar/data/1018724/000119312512032846/
d269317d10k.htm, accessed January 3, 2013.
4 Personal communication from Professor Kinshuk Jerath, January 12, 2013. Data gathered by Professor
Jerath on the Web and in the Pittsburgh area in April 2011.
Internet Retailer, Top500guide.com, accessed January 2, 2013.
op
yo
5
6 AdWeek, http://www.adweek.com/news/technology/amazon-advertisings-sleeping-giant-awaken-2013145964, accessed March 1, 2013.
7 Google Investor Relations, 2012 Financial Tables, http://investor.google.com/financial/tables.html,
accessed January 3, 2013.
8
Edward Krudy, “Apple becomes most valuable company of all time,” August 21, 2012, http://in.reuters.
com/article/2012/08/21/idINL2E8JKC8C20120821, accessed January 3, 2013.
9 Salvador Rodriguez, “Android accounted for 72% of worldwide Q3 smartphone sales,” Los Angeles Times,
November 14, 2012, http://articles.latimes.com/2012/nov/14/business/la-fi-tn-android-smartphone-marketshare-20121114, accessed January 3, 2013.
10 Henry Blodget, “Apple Is Destroying Android in Mobile Web Usage,” June 1, 2012, http://www.business
insider.com/apple-android-mobile-web-usage-2012-6, accessed January 3, 2013.
11
12
tC
Casewriter research adapted from http://www.mobilestatistics.com/mobile-statistics, accessed January 3,
2013. Graph at aforementioned link shows that of the approximately 50 billion apps downloaded between 2008
and 2012, Blackberry’s platform was the source of ~2 billion, Android’s the source of ~15 billion, and Apple’s the
source of ~30 billion, or 60% of all downloads.
Nick Bolton, “Facebook Changes Privacy Settings, Again,” December 12, 2012, http://bits.blogs.nytimes.
com/2012/12/12/facebook-changes-privacy-settings-again/, accessed December 22, 2012.
13
No
Sankrant Sanu, “Higher Click-Through Rates on Facebook Ads Drive Advertisers And Revenue To The
Social Network,” October 26, 2012, http://seekingalpha.com/article/953971-higher-click-through-rates-onfacebook-ads-drive-advertisers-and-revenue-to-the-social-network, accessed January 3, 2013.
14 Plunkett Research, Advertising & Branding Industry Overview 2012, http://www.plunkett
research.com/advertising-branding-market-research/industry-statistics, accessed December 19, 2012.
15
Direct Marketing Association website, http://www.the-dma.org/aboutdma/whatisthedma.shtml,
accessed December 22, 2012.
16
Do
eMarketer Report, “US Digital Ad Spending to Top $37 Billion in 2012 as Market Consolidates,” September
20, 2012, http://www.emarketer.com/newsroom/index.php/digital-ad-spending-top-37-billion-2012-marketconsolidates/, accessed January 3, 2013.
17
Blog.eloqua.com/Internet-marketing-trends, accessed December 18, 2012.
18
Kevin Kelly, “How Money Follows Attention—Eventually,” MIT Technology Review, October 28, 2010,
http://www.technologyreview.com/news/421457/how-money-follows-attention—eventually/, accessed Dec.
18, 2012.
17
This document is authorized for educator review use only by Shoaib Ali, HE OTHER until September 2018. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
Amazon, Apple, Facebook, and Google
rP
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513-060
19
comScore, “comScore Releases October 2012 U.S. Search Engine Rankings,” press release, November 16,
2012, http://www.comscore.com/Insights/Press_Releases/2012/11/comScore_Releases_October_2012_U.S._
Search_Engine_Rankings, accessed January 3, 2013.
20
Ibid.
21
Interactive Advertising Bureau, Interactive Advertising Revenue Report, 2012, first six months’ results,
http://www.iab.net/media/file/IAB_Internet_Advertising_Revenue_Report_HY_2012.pdf, accessed January 3,
2013.
22
op
yo
Peter Cohan, “Click-To-Call: Google’s Key to 96% of Mobile Search Ad Market”, Forbes, October 29, 2012,
http://www.forbes.com/sites/petercohan/2012/10/29/click-to-call-googles-key-to-96-of-mobile-search-admarket/, accessed January 3, 2013.
23
Internet Retailer 2011 report, adjusted by casewriters for U.S. sales.
24
Ibid.
25
Internet Retailer, www.top500guide.com.
26
Do
No
tC
“Technology Giants At War: Another game of thrones,” The Economist, December 1, 2012, http://www.
economist.com/news/21567361-google-apple-facebook-and-amazon-are-each-others-throats-all-sorts-waysanother-game, accessed January 3, 2013.
18
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or 617.783.7860
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